There are various types of users who find the concept of Bitcoin virtual currency uniquely appealing. It’s not a one-size-fits-all sort of thing—Bitcoin is definitely different things to different people.
Bitcoin for Cryptographers
First, know that Bitcoin retains its original appeal to its original constituencies. Chief among these are the cryptographers and crypto-anarchists who got the ball rolling on the whole cryptocurrency thing. Some of these folks are interested in Bitcoin from a purely theoretical perspective; others are true believers in terms of disintermediating financial transactions. Whatever the reason, Bitcoin retains their attention and their passion, and has fueled both refinement of the Bitcoin system and experimentation with newer cryptocurrencies. For this group of people, Bitcoin is a fascinating experiment but not a be-all and end-all; the work will always continue.
Bitcoin for Privacy Advocates
Privacy advocates continue to see Bitcoin as a bright spot in the dim future of the developing surveillance state. With the National Security Agency skimming billions of personal email messages (as well as examining all of our digital photos to fine-tune their facial recognition technology), you don’t have to be a zealot to want to keep at least some of your personal life as private as possible.
One of the prime appeals of Bitcoin is that it takes the big financial institutions out of the picture. Let’s face it, your bank and credit card companies know a lot about you—more than you’d like them to know, probably. Now, they might or might not use that information for their own nefarious means, but just having that information exist puts you at risk. The government can request that data for whatever purposes they might have, and the financial institutions will comply. Even worse, hackers and cyber terrorists can hack into the financial databases, steal your personal information, and then use it for whatever criminal activities they might have in mind. (Witness the 2013 data breach at big-time retailer Target; cyber thieves stole credit card numbers, usernames, and passwords from millions of customers.)
If you don’t have to provide this sort of information to third parties, there’s less likelihood that your personal information will be stolen or compromised. Because Bitcoin takes the middlemen finance guys out of the equation, that means you don’t have to provide them with all this personal financial information. The less info you put out there, the more privacy you’ll have.
Of course, there’s also the appeal of keeping private each individual transaction you make. There’s no reason for MasterCard or Visa or your bank to know what you’re buying or who you’re sending money to. You might have nothing to hide, but why does everybody and their Big Brother need to know about it in the first place? Again, you don’t have to be a hard-line privacy advocate to see the appeal in making your financial transactions less public—which is exactly what Bitcoin does.
Bitcoin for Criminals
Even though all of your personal financial transactions are on the up and up, that isn’t true for everyone. The untraceable nature of Bitcoin had almost immediate appeal to those in the criminal element, who definitely don’t want the authorities tracking their every financial move.
Thus, some of Bitcoin’s earliest adopters were members of the criminal underworld. We’re talking folks who use Bitcoin to purchase illegal drugs, pay for guns, hide income from the IRS, and even launder dirty money.
Consider, as an example, the concept of using Bitcoin to launder drug money. Drug dealers in the U.S. collect dirty dollars when they sell their drugs on the street, but then deposit that dirty money at a Bitcoin exchange. They use the deposited funds to purchase Bitcoin, and then trade the Bitcoin to the parent drug cartel outside the U.S. The cartel then sells that Bitcoin and withdraws the now-squeaky-clean cash. Nobody’s the wiser, and no government can track it.
Bitcoin for Libertarians
A growing component of the Bitcoin user base consists of libertarians—specifically those who want less government interference in their affairs, particularly their economic affairs. Libertarians love the fact that Bitcoin operates outside the traditional financial system, that it’s not controlled by any government or central bank, that its value is purely a function of supply and demand, and that they pretty much can hide their holdings from the government if they like.
The Bitcoin economy is, in a way, a libertarian economic paradise. There’s little to no government interference, there are no arbitrary laws to follow, and it’s a pure market-driven system. It also sticks it to the dreaded Federal government, especially the central bank we know as the Federal Reserve System(or just “the Fed”). For them, Bitcoin is kind of the 21st-century digital equivalent of trading gold and other precious metals.
If you have libertarian economic leanings, then Bitcoin has a lot of appeal. It lets you bypass the traditional financial system, just as its creators intended, and manage your financial transactions on your own terms. All of which is why Bitcoin has such a large number of libertarian-leaning supporters. There’s really nothing else out there like it.
Bitcoin for Investors and Speculators
Today, a large part of the Bitcoin community is composed of investors—speculators, really. Individuals and institutions are purchasing Bitcoin with the sole intent of having them increase in value, just as they do stocks and other securities. These folks treat Bitcoin not as a currency, but rather as equity or property or some other similar asset.
Let’s face it: big-time investing is really nothing more than legalized gambling. The bet is that the investment (in this case, Bitcoin) will increase in value. If the Bitcoin price goes up, you win. If it goes down, you lose.
Given the volatility of Bitcoin pricing of late, it’s easy to understand the appeal to the investor class. When you can buy 1 BTC for $500 and then sell it a month later for $600, that’s a hell of a good investment. I’m not sure there’s much else out there delivering those kinds of returns today.
Of course, what goes up can come down, and Bitcoin is far from a guaranteed investment. For example, if you purchased 1 BTC on November 30, 2013, for $1,136, you probably weren’t very happy when the price dropped to $537 on December 18, just two-and-a-half weeks later. Now, it has gone up a bit since then, but it’s just as easy to lose money as it is to make money when you’re speculating like this.
This price volatility has not scared away many (if any) Bitcoin investors, however. The long-range prospects for capital gains still look good, and Bitcoin is as good a place to speculate as any. In fact, I’d expect more traditional investors to get interested in Bitcoin as time goes by.
Bitcoin for Consumers
Finally, we have the people for whom Bitcoin should have the most appeal as a currency: consumers. Originally, there really wasn’t any place you could spend your Bitcoin. You could trade them back and forth with other users, but there weren’t any merchants who accepted them as payment.
That has changed, and continues to change. Today you can use Bitcoin to pay for purchases at Expedia, Overstock.com, Newegg, TigerDirect, 1-800-Flowers.com, and more than 30,000 other businesses and charities. There’s even a growing network of Bitcoin ATMs you can use out in the real world.
Now, other merchants have steered clear of Bitcoin; Amazon.com, in particular, has noted that it has no current plans to accept Bitcoin currency, and that’s a big no. But more and more merchants are becoming Bitcoin friendly every day, and you can always use a third-party service such as Gyft and eGifter to purchase gift cards with your Bitcoin that you can then use at any traditional merchant.
And that’s why more and more regular consumers are jumping on the Bitcoin wagon. It’s just another way to pay for things.
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